Requirement 1 Prescott expects to produce 225000 basic model

Requirement 1. Prescott expects to produce 225,000 basic models and 225,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model? Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each activity. Abbreviation used: Qty = quantity. Enter the materials handling allocation rate to four decimal places, and the remaining allocation rates to the nearest cent) Predetermined OH Estimated overhead costs Estimated qty of the allocation baseallocation rate Materials Handling

Solution

Answer 1.

Calculation of Predetermined OH Rate:

Materials Handling = Estimated Overhead Costs / Estimated Quantity of the allocation base
Materials Handling = $54,000 / 96
Materials Handling = $562.50 per part

Machine Setup = Estimated Overhead Costs / Estimated Quantity of the allocation base
Machine Setup = $204,000 / 60
Machine Setup = $3,400 per setup

Insertion of Parts = Estimated Overhead Costs / Estimated Quantity of the allocation base
Insertion of Parts = $486,000 / 96
Insertion of Parts = $5,062.50 per part

Calculation of allocated OH:

Basic Model:

Allocated OH = $562.50 * 32 + $3,400 * 20 + $5,062.50 * 32
Allocated OH = $248,000

Professional Model:

Allocated OH = $562.50 * 64 + $3,400 * 40 + $5,062.50 * 64
Allocated OH = $496,000